NETHERLANDS - Dutch banks will need to issue securitised mortgages if local pension funds are to help plug the country's deposit financing gap, according to Angelien Kemna, CIO at €314bn asset manager APG.
Speaking at a seminar organised by the €274bn civil service scheme ABP - APG's largest client - Kemna suggested that a new national bank offering large volumes of mortgages under government guarantee could be another solution.
"But there must be a proper risk/return ratio to make such investments attractive to pension funds," she added.
To date, ABP has invested approximately €6.7bn in mortgage-linked debt in the Netherlands, and any increase of the allocation could pose a concentration risk, Kemna warned.
"An allocation of 15% would make me very nervous," she said.
Earlier at the seminar, Joanne Kellerman, pensions director at the regulator (DNB), had argued that, even if the 10 largest Dutch schemes were to invest 15% of their assets in Dutch banks' €478bn deposit financing gap - largely caused by mortgage lending - the shortfall would be reduced by no more than 10%.
As possible areas of investment by Dutch schemes, Kemna cited PPP projects in specific buildings and infrastructural networks and loans to SMEs and the housing sector, whilst underlining the importance of an inflation-linked approach.
She also expressed a preference for securitised and bank-issued, high-quality loans from varying sectors of small and average-sized companies.
To generate sufficient volume, these securitised loans might also come from abroad, she suggested, adding that the asset manager had already begun speaking with foreign banks on the matter.
She also proposed a pilot project to flesh out the conditions for inflation-linked loans for the housing sector.
Kemna emphasised the importance of a consistent government policy for creating an attractive climate for long-term investments in the domestic market.
"Moreover," she added, "all players need to trust each other and must be prepared to allow each other an acceptable return, before the real negotiations on the conditions can even start."